Nationwide has become the first major mortgage lender to offer first-time buyers the opportunity to borrow up to six times their income on loans of up to 95%.
A married couple buying for the first time with a joint income of €50,000 could now borrow up to €300,000 under the new borrowing limit that comes into effect this week.
It is standard for most lenders to limit loans to starters to 4.5 times their salary. This means that the loan amount cannot exceed the borrower’s income if it were multiplied by 4.5.
In recent months, a number of lenders, including Halifax, have come forward borrow up to 5.5 times their income.
Now Nationwide’s competitive offer will come as welcome news to first-time buyers, many of whom struggle with affordability when applying for a mortgage.
The new borrowing limit will be available through the building society’s Helping Hand mortgage, which was launched in 2021 to support first-time buyers by offering better lending options.
The expanded Helping Hand with the higher borrowing limits will be available from Tuesday, September 24 for five- or ten-year fixed-rate loans up to a Loan-to-Value (LTV) loan of 95%. This means borrowers will need a minimum 5% down payment.
Nationwide said it would give potential homeowners a 33% increase over standard loans at 4.5 times income.
And it comes as Nationwide is also cutting its rates for first-time buyers, meaning that from September 24 it will offer a rate of less than 5% on its standard range to those with a 5% deposit.
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A first-time buyer with a joint income of £50,000 can now borrow up to £300,000 from Helping Hand. This compares to around £225,000 without this boost. It’s an increase of £75,000 assuming a 5% deposit is made and no other costs affect affordability.
Debbie Crosbie, CEO of Nationwide, said: “Helping hand has helped around 40,000 people onto the property ladder since we launched three years ago.
“We want to do more and increase the scheme to six times the income and increase the maximum loan size. This, in addition to our latest rate cuts, further strengthens our leading position in the market and demonstrates that Nationwide, as one of the UK’s largest lenders, continues to put first-time buyers first.”
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Mortgage brokers have also welcomed the improved Helping Hand mortgage as a much-needed addition to the first-time buyer market.
Nicholas Mendes, mortgage technical manager at John Charcol, described Nationwide’s new lending limit as a “gamechanger” for first-time buyers and one that will provide “a powerful boost to helping more people onto the property ladder”.
“By introducing a groundbreaking offer that allows first-time buyers to borrow up to six times their income, Nationwide is putting ‘first-time buyers first’ and tackling the issues major affordability problems that many face today,” he said.
He added: “This increased borrowing power can make all the difference for aspiring homeowners, especially in a challenging market where property prices often seem out of reach.
“By providing this additional financial flexibility, Nationwide is making homeownership dreams a reality for thousands of people who previously struggled to afford their first home.”